Facebook Pays Steep Price to Double User Base in WhatsApp Deal

NEW YORK (The Deal) -- Facebook's (FB) stunning $19 billion purchase of mobile messaging company WhatsApp will bolster the social media company's user base and its growing strength in wireless.

WhatsApp has more than 450 million users per month, and Facebook founder and CEO Mark Zuckerberg said it is on track to hit 1 billion. Facebook itself closed 2013 with more than 1.2 billion users.

WhatsApp co-founder and CEO Jan Koum will take a seat on Facebook's board.

The payout for the acquisition, announced Wednesday, includes $4 billion in cash and $12 billion in Facebook stock. Facebook has also reserved $3 billion in restricted stock units vesting in four years for Whats-App employees.

Zuckerberg approached Koum on Feb. 9 with a general proposal for a deal. The two had follow-up discussions and negotiated a price later in the week.

Facebook will allow WhatsApp to operate independently, as it did with its 2012 purchase of Instagram for the then-extravagant price of $1 billion. "We feel like we've learned from the Instagram experience," the Facebook founder and CEO said during a conference call.

Zuckerberg said it would be "pretty stupid for us to interfere in a big way" with WhatsApp.

"I mean with 50 people at their company they have built a product and a network that has almost half-a-billion people actively using it in five years," Zuckerberg told investors during the call. "No one in the history of the world has done anything like that before."

While the price is staggering, Cowen & Co. analyst John Blackledge noted in a report that Facebook is paying less than $42 per monthly average user, compared to the $45 per monthly user it paid for Instagram.

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